GBP/EUR climbs above €1.17 following German election result

Philip McHugh September 28th 2021 - 2 minute read

The euro fell back on Monday, with the single currency coming under pressure as the uncertainty over a close-run German election triggered some selling.

Meanwhile, trade in the pound is mostly rangebound so far this morning, with GBP/EUR flat at €1.1721 and GBP/USD muted at $1.3687. GBP/CAD is subdued at CA$1.7290, while GBP/AUD and GBP/NZD hold steady at AU$1.8817 and NZ$1.9579 respectively.

Federal Reserve Chair Jerome Powell appearance before Congress is likely to be the focus for today, as he set to be grilled on the bank’s policy plans.

What’s been happening?

The euro opened this week’s session on the defensive, dipping in response to Germany’s election over the weekend.

While the results didn’t come as too much of a shock to markets, the close result may lead to lengthy coalition negotiations, and prolonged uncertainty for EUR investors.

The US dollar also weakened during yesterday’s trading session as the appeal of the safe-haven ‘greenback’ was undermined by a prevailing risk-on environment.

Helping to temper the US dollar’s losses however was the publication of the latest US durable goods orders, which reported a much stronger-than-expected expansion in order growth last month.

The pound, meanwhile, was able to trend higher on Monday, firming in response to an upbeat market mood, which helped to offset concerns over the petrol shortage at UK pumps due to panic buying over the weekend.

What’s coming up?

Looking ahead. The spotlight today is likely to be on the start of Federal Reserve Chair Jerome Powell’s two-day testimony in front of Congress.

Powell will be grilled on the Fed’s outlook for the US economy as well as the bank’s stance on monetary policy, with the US dollar likely to strengthen if he more strongly indicates that the Fed’s tapering of its bond purchases will begin in November.

In the meantime, EUR investors may look to a speech by European Central Bank (ECB) President Christine Lagarde to provide fresh trading impetus for the euro today.

Finally, with GBP data releases thin on the ground, the direction of the pound may be dictated by domestic headlines, potentially leaving Sterling vulnerable if the current doom and gloom persists.

Written by
Philip McHugh

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